Grants to Non-Government Schools

Tabled: 9 March 2016

2 Grants governance and oversight

At a glance

Background

The Department of Education & Training's (DET) responsibility for administering grants to non-government schools is laid out in a series of memorandums of understanding, guidelines and funding agreements. These agreements set out the government's objectives for the grants, conditions on their use and the related reporting requirements.

Conclusion

There is limited assurance that grant funds are being used for their intended purpose or are achieving the government's intended outcomes. This is primarily due to weaknesses in funding agreements, and DET's inadequate grants management including limited oversight of grant recipients and poor monitoring and reporting. DET has recently developed improved interim arrangements for 2016 which address some deficiencies.

Findings

  • Beyond basic financial reporting there are no performance measures or monitoring or reporting associated with grants to non-government schools.
  • The reporting that does occur is not sufficiently tested or used by DET to determine whether grants are being used as intended.
  • DET undertakes limited oversight and monitoring of non-government schools receiving state government grants.

Recommendations

That DET:

  • continues to improve the state recurrent grant funding agreement goals and performance measures
  • clarifies record keeping and reporting requirements for grants
  • improves special purpose grant funding agreements
  • develops program of audits of grant recipients and non-government schools.

2.1 Introduction

The purpose and use of grants provided to non-government schools is governed by a number of documents, particularly the Victorian Non-Government Schools Funding Agreement 2010–2013, which incorporates the Victorian Government Financial Assistance for Non‑Government Schools 2010–2013 Guidelines.

The Department of Education & Training (DET) negotiates the terms of the funding agreements, issues the guidelines, determines the amount of the grants, allocates funding under the agreements and is responsible for enforcing the terms of the agreements on behalf of the state. It is responsible for ensuring the grants to non-government schools are meeting the government's policy objectives.

This Part examines the governance arrangements for grants to non-government schools and DET's oversight of the non-government school sector.

2.2 Conclusion

There is limited assurance that funds are being used for their intended purpose or are achieving the government's intended outcomes. This is primarily due to weaknesses in funding agreements, and DET's ineffective grants management. This includes insufficient oversight of grant recipients and their use of grants, and inadequate monitoring and reporting.

While the funding agreements and associated guidelines set out the goals of the grants and conditions on their use, there are no performance measures or targets, and limited reporting requirements. Controls that do exist are not used by DET to test or validate how grants are used by non-government schools.

The absence of clear, appropriate governance has led to poor grant administration and a lack of monitoring or oversight to ensure grants are being used as intended. It is encouraging that DET has recently developed interim memorandums of understanding (MoU), funding agreements and guidelines for the major state recurrent grant funding which have strengthened reporting and accountability requirements. It is important that DET continues to work with the non-government sector to further improve accountability and transparency for the use of state government grants when developing arrangements for 2017 and beyond. DET must also improve its oversight, monitoring and reporting of grant recipients.

2.3 State recurrent grants

2.3.1 Purpose of the state recurrent grants

The purpose and goals of the state recurrent grants (SRG) are set out in the 2010–13 funding agreements between DET and the non-government system authorities and with independent, non-systemic schools.

The funding agreement has the following goals, which were agreed by DET and non-government school sector representatives and independent, non-systemic schools:

  • improving student outcomes
  • providing funding certainty for schools and school systems
  • improving the equity of funding by targeting need
  • supporting choice and assisting parents to make informed choices
  • supporting best practice approaches in schools
  • achieving effective partnerships
  • achieving the effective and efficient use of public funds.

There are no performance measures or monitoring and reporting requirements associated with these goals, therefore DET has no ability to assure itself that they are being achieved. DET agrees that there is limited assurance that funds are used for intended purposes, although it believes that reporting for the Australian Curriculum, Assessment and Reporting Authority (ACARA), for the Australian Government's Financial Questionnaire, and system authority and school acquittals provide evidence of reporting. We also note that the Australian Government undertakes a Financial Questionnaire verification exercise—a routine quality assurance process in which the relevant Australian Government department checks whether Financial Questionnaire data submitted by non-government schools and school systems has been correctly drawn from their audited statements.

ACARA is responsible for collecting data from schools for the purpose of accountability and reporting, research and analysis, and resource allocation. Information on individual schools is also published on the My School website including information about performance on National Assessment Program – Literacy and Numeracy (NAPLAN) tests as well as information about school finances and school communities. While we accept there is a range of reporting, data and information relating to non-government schools that DET has access to, it does not use this information to monitor the performance of non-government schools or the achievement of the goals of the funding agreement.

DET has acknowledged that there are opportunities for improving the monitoring and assurance around grant funds. A recent review commissioned by DET also found that there are significant weaknesses with performance measures and related monitoring by DET. It found that:

  • DET has yet to define the objectives of the recurrent funding program and determine how to best utilise the 'reasonable conditions' clause within the amended Education and Training Reform Act 2006 (discussed in Section 1.3.5)
  • no significant performance measures have been developed or utilised in relation to state recurrent funding provided to non-government schools
  • DET may lack the systems, technology and resources required to implement a non-government school performance monitoring framework.

The review also found that current funding arrangements have been limited in their scope and have lacked sufficient rigour around performance measures and reporting on outcomes. It found that while annual financial acquittals have been provided by individual independent schools and system authorities, these acquittals provide limited detail about the expenditure of the funds received. In addition, it found that reporting to DET around educational outcomes for the non-government school sector has been limited and largely informed by data collected at a national level.

As discussed in Section 2.6, interim funding agreements have been developed for 2016 and these include improved performance measures that will use data to be sourced from a range of sources external to DET.

2.3.2 Reporting required by the funding agreements

Funding agreement clause 21 requirements

Under clause 21 of the funding agreements with all non-government school bodies except the Catholic Education Commission Victoria (CECV), the recipient must keep full and accurate records to enable:

  • the identification of all income and expenditure of funds provided under this agreement
  • the audit of those records in accordance with current Australian professional accounting standards
  • the recipient to perform and report on any obligations under this agreement.

DET advised that the intent of this clause was that all school systems and schools keep full and accurate records to enable the identification of all income provided under the agreement and the expenditure of school funds. It advised that this does not extend to schools and systems being required to separately identify expenditure of SRG funds as opposed to expenditure from other sources of funding.

CECV's funding agreement with DET has a different clause 21 compared to all other funding agreements, with the second and third points the same. It reads as follows:

The recipient must keep, and must ensure that the systemic schools keep, full and accurate records, including financial records, to enable:

  • the identification of all income provided under this agreement and expenditure of school funds
  • the audit of those records in accordance with current Australian professional accounting standards
  • the recipient to perform and report on any obligations under this agreement.

It is not clear why CECV had a different clause in its funding agreement which could be interpreted as meaning there were different requirements for CECV and Catholic schools, compared to all other non-government schools, despite them all receiving the same SRG funds. DET advised that while there was a difference in the clause relating to record keeping in past agreements for CECV and the other school systems and schools, the intent of this clause was the same. However it did not provide any evidence to support this assertion. CECV's view is that the requirements of clause 21 in its funding agreement with DET mean that Catholic schools do not have to separately track SRG expenditure, which is consistent with DET's advice.

DET advised that while there was a difference in the clause relating to record keeping in past agreements for the CECV and the other school systems and non-systemic schools, this anomaly was addressed in the 2016 agreement. DET reiterated that this requires all school systems and non-systemic schools to keep full and accurate records to enable the identification of all income provided under the agreement and the expenditure of school funds, but it does not extend to schools and systems being required to separately identify expenditure of SRG funds as opposed to expenditure from other sources of funding.

In new 2016 interim funding agreements, the relevant clause is the same for all grant recipients, including CECV. DET should make the intent of this clause and the explicit record keeping and reporting requirements clear and should communicate this to the non-government school sector. This is important as this clause establishes fundamental record keeping and accountability requirements for non-government schools. This is also relevant to the school level activities discussed in Part 3 including schools' general inability to demonstrate how grant funds were spent.

Specific reporting requirements

Reporting requirements are set out in the funding agreements and the guidelines. The main requirement is the provision of a certificate by a qualified person (a registered company auditor and/or a member of the Institute of Chartered Accountants or Certified Practising Accountants) stating whether an amount equal to the funds paid under the agreement has been spent or committed to be spent for each calendar year, and for the purposes for which the funds were provided.

Audited financial statements and financial reports must be provided if requested by DET. However, DET has never exercised these requirements and this represents a gap in its accountability framework.

Other reporting requirements, which grant recipients must comply with, include the provision of:

  • student family occupation data for each school
  • the number of students with a disability (SWD) enrolled at each school, specifying the number of students at each Disability Severity Level
  • are port, in the format specified in the guidelines, on SWDs enrolled and programs provided by each school for SWDs.

2.3.3 Monitoring performance against the funding agreements

DET oversight

DET does not oversee or monitor the use of SRGs beyond receiving financial acquittals. Nor does it use other sources of performance information to assure itself that the intended goals are being achieved. As discussed in Section 2.6, new interim arrangements partially address these issues, provided DET improves its monitoring and oversight activities.

As monitoring and reporting are limited to financial acquittals, there has been a lack of accountability for achieving the government's goals for the use and outcomes of SRGs. Identified weaknesses in DET's oversight are supported by the findings of its 2015 review of the accountability and reporting framework for non-government schools in relation to financial management and stewardship:

  • The current acquittals provide limited value or assurance to DET. There is no formal mechanism to validate or confirm the information provided. The funding agreements provide DET with powers to request additional financial information,however, this has never been used.
  • DET does not currently use the Australian Financial Questionnaire to analyse the financial position of non-government schools.

2.4 Other grants

Conditions and requirements for other grants are set out in the relevant funding agreements and associated guidelines. DET does not oversee how schools use these grants, which means that it cannot provide assurance that the grants are being used for their intended purposes or achieving their intended objectives.

2.4.1 Students with disabilities grants

For SWD grants, CECV reports to DET for Catholic schools, while Independent Schools Victoria (ISV) reports for all independent schools, including Lutheran, Ecumenical and Seventh Day Adventist schools. These acquittals show the allocation of SWD funding to individual schools. The guidelines state that schools or system authorities must complete and provide to DET by 1 April 2011, 2012, 2013 and 2014, a report on programs provided for SWDs in the previous calendar year.

System authorities were to provide a completed system-level report. The report was to contain information on the number of SWDs at each severity level enrolled in the current calendar year, details of the programs provided to support these students, details of the demand for specific programs and an acquittal of expenditure against these programs.

Schools were only required to provide a report once its format was developed. This never occurred, and consequently this requirement was never enforced and DET only received acquittals of the allocation of grant funds to each school.

2.4.2 Special purpose grants

Reporting to DET on special purpose grants by CECV, ISV and the Victorian Independent Schools Block Grant Authority (VIS BGA) consists of one-page financial acquittals and metrics such as the number of students receiving support services, and/or the number of teachers receiving professional development relating to suicide prevention and/or the number of schools receiving interest subsidy funding. These are output metrics; there is no other accountability relating to the delivery or outcomes of these grants.

In the 2013 funding agreements with CECV and ISV, DET requested metrics on different grant programs, such as:

  • the number of students receiving support services
  • the schools involved in the support services program
  • the type of support services delivered
  • the number of teachers receiving professional development relating to suicide prevention
  • the outcomes of the consultancy services funded under the suicide program
  • the number of schools receiving interest subsidy funding
  • the number of schools funded in comparison to the number of eligible applicants.

However, to reduce the administrative burden, funding agreements were combined in 2014. For CECV the support services, suicide prevention and interest subsidy funding agreements were rolled into one, while for ISV the support services and suicide prevention funding agreements were combined. For independent schools the interest subsidy funding agreement is signed with VIS BGA. The 2014 agreements do not include the above metrics and simply request the provision of details of payments made under the three programs. This diminishes oversight, accountability and transparency.

DET oversight of special purpose grants

DET advised that CECV and ISV have the responsibility for administering and overseeing grants made to schools for all special purpose programs, and that CECV and ISV monitor and evaluate the programs according to guidelines provided by DET. In effect, this means that CECV and ISV oversee themselves, as they receive the grant funding from DET, manage the allocation of grants to schools, and provide acquittals to DET on expenditure. DET also advised that it has only assessed acquittals from system authorities to ensure that expenditure matched the payments provided. DET does not oversee or monitor ISV or CECV to assure itself that grants are used for their intended purpose or are achieving the intended outcomes.

2.4.3 Facilitation and reward payments

Facilitation and reward payments are designed to 'widen and deepen the implementation of the Smarter Schools National Partnerships on Literacy and Numeracy, Improving Teacher Quality and Low Socioeconomic School Communities'. Conditions relating to the payments were designed to be consistent with those applying to National Partnerships.

These partnerships have now lapsed. However, DET has continued funding facilitation and reward payments. The reward payments were allocated to reward reform, based on the 'achievement of predetermined milestones and benchmarks'. DET cannot be assured that milestones and benchmarks are being achieved because it does not have a monitoring and evaluation framework in place for facilitation and reward payments.

2.5 DET responsibility for non-government schools

Clear governance arrangements are essential for effective oversight and accountability for the expenditure of government funds.

Over many years DET has lacked clear, appropriate governance around grants to non-government schools. This has led to poor grant administration, including a small number of acquittals not being submitted by grant recipients. Significantly there has been very limited monitoring or oversight of grant recipients that would provide DET with the necessary assurance that grants are being used as intended or achieving the intended outcomes.

Figure 2A shows the various divisions and branches of DET and the former Department of Education and Early Childhood Development with various responsibilities related to non-government schools.

Figure 2A
Departmental responsibilities for non-government schools 2009 – present

Division or branch

Functions

2009

System Policy Division

Office for Policy, Research and Innovation

  • Non-government schools policy
  • Accountability
  • Data analysis
  • Capital funding

Financial Services Division

  • Funding provision
  • Management Non-government Schools Reference Committee

2012

Education Partnerships Division

School Education Group

  • Non-government schools policy
  • Accountability
  • Capital funding
  • Schools acquittal process

Financial Services Division

  • Funding provision
  • Management Non-government Schools Reference Committee

Infrastructure and Sustainability Division

  • Infrastructure issues

Intergovernmental Relations Division

  • National Partnerships

2013

As for 2012 with amendment:

School Education Group

  • Additional accountability for Facilitation and Reward funding

2014

Financial Services Division

  • Funding provision
  • Management Non-government Schools Reference Committee
  • Schools' acquittal process (accountability)

School Education Group

  • Facilitation and Reward funding

2015

Group Strategy and Coordination Division (Early Childhood and School Education Group)

  • Non-government school policy
  • Development of 2016 MoU and funding agreements
  • School Policy and Funding Advisory Council and DET working group

Infrastructure and Sustainability Division

  • Infrastructure issues, including new government commitment of $120 million to build and upgrade Catholic and independent schools across the state

Source: Victorian Auditor-Generals Office based on information from the Department of Education & Training.

DET's Financial Services Division allocates grant funds and receives acquittals. However, it does not undertake any testing or verification associated with the allocation or use of the funds, and no monitoring, reporting or oversight of grants recipients or the use of grants by non-government schools.

DET has advised that the Group Strategy and Coordination Division of the Early Childhood and School Education Group are now responsible for non-government school policy. It has developed a formal work program to put the legislative amendments into operation and has developed the interim 2016 MoU and funding agreements. The Group Strategy and Coordination Division's role includes the development and oversight of funding agreements for non-government schools (with the Infrastructure and Financial Services Division) and establishing and overseeing the ongoing operations of the School Policy and Funding Advisory Council (SPFAC).

DET advised that the establishment of SPFAC, which has an agreed 2016 work program, provides a strong governance framework for DET and the non-government school sector. The implementation of improved arrangements in 2016 and the further development of strengthened accountability and transparency arrangements requires DET to have a far more active role in overseeing and monitoring the agreements, non-government schools use of grants and the achievement of intended outcomes.

2.6 Recent developments

DET advised it is strongly committed to ensuring that the funding provided by the state government to the non-government school sector is provided for the benefit of improved educational outcomes in Victoria and is spent in accordance with Victorian legislation, the funding agreements and government policy.

DET recognises the need to improve its ability to demonstrate whether grant funds are being used to deliver the outcomes for which they are provided. It advised that assurance over grant funding can be improved, with key areas for improvement being the funding agreement and DET's grant management process. This includes improving DET's oversight of grant recipients for the use of grants and in the monitoring and reporting by recipients that grant funds have been spent in accordance with the purpose for which they were intended.

DET advised it has commenced a program to enhance and improve the arrangements for grant funding to non-government schools through a combination of legislative, funding and regulatory means. The introduction of the Education and Training Reform Amendment (Funding of Non-Government Schools) Act 2015 established the following:

  • funding is paid directly to non-government schools or to an organisation (such as CECV or ISV) for the benefit of the non-government schools
  • the Minister of Education may impose any 'reasonable conditions' on the provision of funding and may require a non-government school or organisation to enter into an agreement
  • anon-government school is to provide a report (to the minister) if required, outlining the application of recurrent funding.
  • formalizes establishment of the SPFAC.

DET has developed a new MoU, funding agreement and guidelines for 2016 to improve to its grant administration and governance. These are interim measures with new arrangements to be developed for commencement in 2017. The interim measures for 2016 were developed in consultation with CECV and ISV through SPFAC. DET advised it has also established its own Non-Government Schools Funding and Accountability Working Group to drive the work required by DET to improve processes and provide support to the work of SPFAC.

2.6.1 2016 memorandum of understanding

The 2016 MoU between DET and CECV, and DET and ISV set out a commitment by the parties to work together through SPFAC to achieve high quality educational outcomes across all schools, and to support the Victorian Non-Government Schools Funding Agreement 2016.

The MoU sets out a range of contextual information and commitments, including:

  • the parties' commitment to work together to address the findings and recommendations from this audit of grants to non-government schools
  • the parties' commitment to participate in the Education State vision and directions, and recognise targets apply to all students in all school sectors
  • the investigation and development of school-level measures to support monitoring and progress towards the Education State targets
  • a comprehensive review of the allocation methodology of the Financial Assistance Model (FAM)
  • commitment to an efficient and effective reporting and monitoring framework that strengthens accountability and efficient administration for non-government schools
  • commitment to the development of a new funding agreement and MoU from 2017, including responding to any changes arising from Education State priorities, this audit of grants to non-government schools, and other relevant state and Australian reforms
  • improved financial acquittal processes and school-level performance outcome measures, outlined in the funding agreement.

2.6.2 Guidelines for Victorian Government financial assistance for non-government schools 2016

The Guidelines for Victorian Government financial assistance for non-government schools 2016 have been updated to reflect a range of changes including the current policy environment, establishment of SPFAC and the new 2016 MoU and funding agreements. The guidelines outline the state's financial assistance to non-government schools and the type and purpose of grants, performance measures, reporting requirements and so on consistent with the new MoU and funding agreement. The guidelines also outline the FAM used to allocate the state recurrent grant to non-government schools, although DET has committed to reviewing FAM during 2016.

2.6.3 Victorian Non-Government Schools Funding Agreement 2016

The 2016 funding agreement includes some notable changes compared to the 2010–13 agreement, including the goals and improved performance measures and reporting requirements. It includes some background information on the purpose of the recurrent grants, stating that DET provides recurrent financial assistance grants to non-government schools in Victoria to support the state's education policies and goals. The agreement outlines that financial assistance contributes to meeting the operational costs of schools for the purpose of supporting the teaching, learning and welfare of school students.

Goals

Unlike the previous agreement, there are no specific goals. However, the 2016 MoU includes a commitment to participate in the Education State vision and directions, and recognises that targets apply to all students in all school sectors. The Education State targets cover a range of areas relating to student learning, resilience, physical activity, school completion and the impact of disadvantage.

Reporting requirements

The 2016 agreement includes some strengthened reporting requirements including specifying how funding is spent, and a more robust acquittal process at the school level with a certificate issued by the school head and an independent auditor. It also strengthens financial oversight by requiring evidence that funding has been spent in specified categories. It also specifies areas that funding must not be used for.

The agreement includes provisions similar to the past arrangements allowing DET to undertake monitoring and audits. This provides an opportunity for DET to undertake a regular and robust program of audits of non-government schools to provide the requisite assurance that government grants are being used for their intended purposes. Under legislative changes from 2015, the Minister for Education may also require a non-government school to provide a report outlining the use of recurrent funding.

The 2016 MoU specifically commits the non-government school sector to work with DET in the development of school-level measures to monitor progress towards the Education State targets. The agreement also includes new performance outcomes and associated measures which will use information from other agencies. The outcomes and measures are shown in Figure 2B.

Figure 2B
Performance outcome data, 2016 funding agreement

Outcome

Measure

Data source

Achievement

Reading (per cent of Year 5 and Year 9 students with a score in the top 2 bands)

NAPLAN

Numeracy (per cent of Year 5 and Year 9 students with a score in the top 2 bands)

NAPLAN

Engagement and wellbeing

Certificate completion (per cent of Year 11 students who attain a certificate)

Certificate completion

Attendance (aggregate school attendance rate Years 1–10, the proportion of students attending 90 per cent or more of the time)

National collection student attendance data

Source: Victorian Auditor-Generals Office from the Victorian Non-Government Schools Funding Agreement 2016.

These new performance measures are consistent with the Victorian Government Education State reform agenda. DET advised these measures were chosen in response to the recommendations of its external review that 'government objectives for funding of NGS [non-government schools] align with the Victorian Education State agenda; a clear basis be determined for understanding school performance through monitoring of selected measures (consistent with government school measures); and data requirements and the department's proposed use of information be clearly identified'.

While there are no specific measures in the 2016 funding agreement associated with the school-level measures for reading, numeracy and certificate completion, the measures are consistent with Education State targets:

  • Over the next five years 25 per cent more Year 5 students will reach the highest levels of achievement in reading and maths.
  • Over the next 10 years 25 per cent more Year 9 students will reach the highest levels of achievement in reading and maths.

In addition, the completion measure is consistent with reporting on progress towards the following Education State target:

  • Over the next 10 years the proportion of students who leave education early (between Years 9 and 12) will fall by 50 per cent.

While the performance measures in the 2016 funding agreement do not cover all Education State targets, DET advised further work will be undertaken to develop further sector-wide targets and relevant measures for the 2017 funding agreement. Nevertheless, the inclusion of performance measures in the funding agreement is encouraging, and they should be improved over time.

Recommendations

That the Department of Education & Training:

  1. continues to improve the state recurrent grant funding agreement so that all relevant Education State targets for non-government schools are explicit and supported by relevant and appropriate performance measures and reporting requirements that enable the department to monitor the achievement of intended outcomes
  2. in conjunction with the non-government schools sector, clarifies and strengthens record keeping and reporting requirements for the expenditure of all state government grants so that requirements are explicit and well understood by grant recipients and all non-government schools
  3. improves special purpose grant funding agreements to ensure they have explicit and measurable outcomes, supported by relevant and appropriate performance measures and reporting requirements, that enable the department to monitor the achievement of intended outcomes
  4. develops a program of audits of grant recipients and non-government schools to provide assurance grants are being used as intended.

Back to Top